How Do We Become Outside-In?
While supply chain leaders stand up at conference after conference and brag about how they save money, improve inventory and drive improvements in customer service, we find that nine out of 10 supply chains are stuck at the intersection of inventory turns and operating margin. So, did these supply chain leaders lie in their presentations? No, we don’t think so. Why the gap? I think that three things have happened:
Project Focus Within Vertical SIloes
Most of the stories told at conferences are vertically focused projects within organizations. These projects are approved based on a defined threshold of return on investment, but unfortunately, Project 1 + Project 2 + Project 3 + Project 4…. to Project N does not guarantee success. The reason? The projects are not orchestrated to an end-to-end operations strategy. Many are focused on delivering supply chain excellence through vertical silo excellence. However, strong vertical excellence does not make the best supply chains. It is the sum of the parts that matter, and the parts need to be clearly defined to fit together to deliver on a strategy. This is a point that many supply chain leaders do not understand.
Belief in Best Practices
The goal has been to improve the potential of a company, to improve the operating margins, reduce inventory levels and drive improvements in customer service. There is a belief that there are best practices — processes that come out of a software box or through focused work with a group of consultants. I don’t think it is that easy. The real world requires the design of processes based on the business strategy. It is a process of designing systems — design/planning processes/supply chain execution — to work together seamlessly. This requires leadership, patience and evolution. It is not as easy as opening a box of software or implementing an end-to-end big bang project. Instead, it is a year-over-year process of defining, redefining and tweaking flows, buffers and plans against an operating strategy.
Rise in Complexity
As the number of products and services multiply, demand error has increased. In parallel, commodity markets are more volatile with many operating challenges. Organizations are squeezed from both ends and there is a need to redesign the processes outside-in, but most companies are still implementing inside-out processes. As long as we wait to catch orders and shipments and translate them into conventional processes that delay and distort the signal, we will continue to be stuck. The impact becomes more pronounced as complexity continues to rise. To redesign the processes outside-in, the focus needs to be on demand sensing and demand translation. There is a need to use channel data and redefine manufacturing processes.
In preparation for the Supply Chain Insights Global Summit, we asked leaders to tell us where they were investing to unstick their supply chains. We found that the group plans to invest in three software projects this year: Inventory reduction, S&OP and forecasting. I am perplexed by these traditional investments. During the conference, I will challenge the group on the concepts of outside-in processes. Join us as I prod and push the group to think differently. Will they be implementing inventory to look at inventory levels? Or, will it be a focus outside-in based on rhythms and flows? Will the focus be on enterprise S&OP with a narrow focus on Integrated Business Planning, or will this be outside-in to translate channel data into buying strategies and orchestrating go-to-market strategies from buy-side to sell-side markets? And, will the investments in forecasting help? Over-and-over again I see companies improve forecasting, but not know how to use the improved signal into planning. My fear is that investments are for inside-out and will not unstick the supply chain to unleash new opportunities. The answer lies in the design and implementation of outside-in processes.
Project Focus Within Vertical SIloes
Most of the stories told at conferences are vertically focused projects within organizations. These projects are approved based on a defined threshold of return on investment, but unfortunately, Project 1 + Project 2 + Project 3 + Project 4…. to Project N does not guarantee success. The reason? The projects are not orchestrated to an end-to-end operations strategy. Many are focused on delivering supply chain excellence through vertical silo excellence. However, strong vertical excellence does not make the best supply chains. It is the sum of the parts that matter, and the parts need to be clearly defined to fit together to deliver on a strategy. This is a point that many supply chain leaders do not understand.
Belief in Best Practices
The goal has been to improve the potential of a company, to improve the operating margins, reduce inventory levels and drive improvements in customer service. There is a belief that there are best practices — processes that come out of a software box or through focused work with a group of consultants. I don’t think it is that easy. The real world requires the design of processes based on the business strategy. It is a process of designing systems — design/planning processes/supply chain execution — to work together seamlessly. This requires leadership, patience and evolution. It is not as easy as opening a box of software or implementing an end-to-end big bang project. Instead, it is a year-over-year process of defining, redefining and tweaking flows, buffers and plans against an operating strategy.
Rise in Complexity
As the number of products and services multiply, demand error has increased. In parallel, commodity markets are more volatile with many operating challenges. Organizations are squeezed from both ends and there is a need to redesign the processes outside-in, but most companies are still implementing inside-out processes. As long as we wait to catch orders and shipments and translate them into conventional processes that delay and distort the signal, we will continue to be stuck. The impact becomes more pronounced as complexity continues to rise. To redesign the processes outside-in, the focus needs to be on demand sensing and demand translation. There is a need to use channel data and redefine manufacturing processes.
In preparation for the Supply Chain Insights Global Summit, we asked leaders to tell us where they were investing to unstick their supply chains. We found that the group plans to invest in three software projects this year: Inventory reduction, S&OP and forecasting. I am perplexed by these traditional investments. During the conference, I will challenge the group on the concepts of outside-in processes. Join us as I prod and push the group to think differently. Will they be implementing inventory to look at inventory levels? Or, will it be a focus outside-in based on rhythms and flows? Will the focus be on enterprise S&OP with a narrow focus on Integrated Business Planning, or will this be outside-in to translate channel data into buying strategies and orchestrating go-to-market strategies from buy-side to sell-side markets? And, will the investments in forecasting help? Over-and-over again I see companies improve forecasting, but not know how to use the improved signal into planning. My fear is that investments are for inside-out and will not unstick the supply chain to unleash new opportunities. The answer lies in the design and implementation of outside-in processes.